Tough mortgage rules on irresponsible lending will hit borrowers

GETTING a mortgage is about to become tougher as lenders take a closer look at borrowers’ spending habits.

With the new mortgage rules, banks will be going through contracts very carefully [GETTY/MODELS USED]

That one-off purchase or even a flutter on the horses could affect whether loans are approved.

Under the Mortgage Market Review, rules come into effect on Saturday that aim to reduce irresponsible lending.

Experts advise borrowers to reduce spending before submitting a mortgage application, as lenders will search through at least three months of bank statements “with a fine tooth comb”.

Our advice is to cut back for three months before applying for a mortgage: pay off debts and simply spend less

Jonathan Harris, of mortgage broker Anderson ­Harris

People looking to remortgage will also be affected, and providers may include a “stress test” to ensure repayments can still be met if interest rates rise.

Many brokers are already applying the new rules.

Ray ­Boulger, senior technical manager at mortgage adviser John Charcol, said in one case a lender had queried someone’s £6-a-month milk bill. In another, a bet made using a bank card had prompted questions about whether the ­person was a habitual gambler.

Jonathan Harris, director of mortgage broker Anderson ­Harris, said: “The main difference is that previously an applicant declared their outgoings and the lender took a cursory look at bank statements; now the bank is likely to go through them with a fine tooth comb. Our advice is to cut back for three months before applying for a mortgage: pay off debts and simply spend less.”

Martin Wheatley, chief executive of the Financial Conduct Authority, said: “In the past too many people got a mortgage by simply telling their lender they would have no problem repaying their debt.”